Daily Brief: China’s Struggling Economy Didn’t Phase Baidu

Daily Brief: China’s Struggling Economy Didn’t Phase Baidu

over 1 year ago3 mins

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Chinese internet giant Baidu reported better-than-expected quarterly results on Tuesday.

What does this mean?

Baidu – the company behind China’s biggest search engine – usually makes a lot of its money from digital marketing, but China’s struggling economy is hardly encouraging businesses to splash the cash. Baidu’s online marketing sales fell 12% last quarter from the year before as a result, a trend also clear in rival Tencent’s results earlier this month.

So Baidu will be feeling extra grateful for its cloud business, which grew its revenue by 31% from the same time last year on the back of steadily rising demand for internet applications. So sure, Baidu’s overall revenue dropped for the first time in two years, but the 5% dip was still better than analysts feared. Then sprinkle in some increased profit margins here – “here” being Baidu’s Netflix-esque video service iQiyi – with some cost cuts there, and Baidu’s profit came in a whopping 63% higher than expected.

Baidu stock

Why should I care?

The bigger picture: No more awkward cab chats.

Baidu's newer ventures could help it further offset that sluggish core advertising business in the future. The internet giant’s doubling down on self-driving technology, for one, having invested heavily into the sector over the past five years. It’s been a good ride so far: Baidu’s “Apollo Go” driverless robotaxis completed nearly 300,000 rides last quarter, and it secured a permit this month that’ll let it operate without on-board safety supervisors for the first time ever in China.

Zooming out: Buffett’s driving change.

Warren Buffett’s going driver-free too, with Pilot Co. – the Berkshire Hathaway-owned truck stop operator – agreeing to take a stake in driverless truck startup Kodiak Robotics last week. That could be a savvy move: the existing pool of truck drivers is shrinking and aging, so driverless solutions could help alleviate that shortage, bring down costs, and even improve safety too.

Keep reading for our next story...

Europe Finally Has Its Own Back

EU gas image

Data out this week showed that Europe’s already closing in on its gas storage targets.

What does this mean?

Russia’s been cutting the amount of natural gas it sends into Europe for months, and that supply’s about to drop even lower as the Nord Stream – one of the main pipelines between Russian and Europe – undergoes unexpected maintenance starting this week. But Europe’s been preparing for this: the region upped the minimum required level of its reserves earlier this year, and it’s been building those stockpiles as fast as it can. After all, those reserves typically provide around 30% of the fuel used during frosty European winters – and they’ll probably account for even more now there’s less imported gas to go around. While hoarding gas won’t solve all of Europe’s energy problems, it’s still good progress: European Union reserves were filled to nearly 80% last week, meaning the region’s hit its November target a whole two months early.

EU gas
Source: The Wall Street Journal

Why should I care?

The bigger picture: China’s trash is Europe’s treasure.

Europe did benefit from a stroke of good luck: China’s sputtering economy has pushed the world’s biggest buyer of liquefied natural gas to sell off surplus supplies, and Europe jumped at the chance to buy some for its reserves. But recent history’s warned the region against depending on one supplier, so it’s been trying to upgrade its own renewable energy infrastructure and bolster its energy imports from the Middle East and US as well.

For markets: Good news, bad reaction.

News of healthier-than-expected supplies sent Europe’s natural gas prices plunging by the most since March, a welcome change from their steep incline over the last few months. Mix that with data out on Tuesday that showed inflation expectations at their lowest since spring, and that’s, uh… still not enough to put a smile on dejected European faces. In fact, consumers and businesses are the most pessimistic they’ve been about Europe’s economic outlook since the Covid-ridden January 2021.

EU gas prices
Source: Trading Economics
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